First Punitive Anti-dumping Duty
The U.S. government slapped a 20-fold higher punitive anti-dumping duty rate than preliminary finding on large power transformers made by a Korean enterprise. It is the first time for the U.S. to impose a punitive anti-dumping tariff on Korean industrial products, except for intermediate steel products.
According to the Ministry of Trade, Industry and Energy (MOTIE) and Hyundai Heavy Industries on March 9, the U.S. Department of Commerce finalized a 61 percent anti-dumping duty on large power transformers produced by the shipbuilder on the 8th (local time). In September last year, Hyundai Heavy was levied a 3.09 percent anti-dumping rate. Iljin and Hyosung also faced preliminary rates of 2.32 percent and 1.76 percent, respectively. In the final filing, Hyundai Heavy was imposed a 20 times higher rate than the preliminary levy.
An official from Hyundai Heavy said, “It is the incomprehensible ruling compared to the preliminary decision last year and we are planning to take legal action. We expect to lower the punitive rate after it appeals to the U.S. Court of International Trade.”
The U.S. decision on levy anti-dumping tariffs on Korean transformers dates back to 2011. At that time, ABB Inc, the U.S. division of Swiss engineering company ABB, filed an anti-dumping complaint against Hyundai Heavy and the U.S. set the final anti-dumping duty of 15 percent next year. The rate had decreased to 12.4 percent at the Annual Review, which has been held from 2015, and then to 4.1 percent in 2016. However, Hyundai Heavy was slapped a whopping 61 percent rate with the incoming of the Trump administration this year.
The South Korean authorities were wary of a broad interpretation. First of all, the U.S. Department of Commerce is said to impose the high anti-dumping tariff on Hyundai Heavy’s transformers based on a new customs clause dubbed the “adverse facts available (AFA).” The AFA allows the government to impose a high punitive anti-dumping duty when a company accused of unfair business practices doesn’t provide information requested or send inaccurate information. After the tax revision last year, the U.S. Department of Commerce levied the high tariffs on five steel products manufactured by POSCO and Hyundai Steel, including the anti-dumping duty rate of 47.8 percent on steel products,anti-dumping and countervailing duty rate of up to 60.93 percent on hot rolled steel sheets and anti-dumping and countervailing duty rate of up to 64.68 percent on cold rolled steel sheets.
In fact, the anti-dumping tariff on transformers made by Iljin and Hyosung slightly increased to 2.99 percent. An official from the MOTIE said, “We believe Hyundai Heavy was imposed a high rate of duties due to the AFA. We don’t think it targets entire Korean products.”
However, some express concerns that the AFA can be effective measure for the Trump administration to slap Korea as the clause can be arbitrary. The U.S. Department of Commerce already made a preliminary ruling to levy up to 44 percent of an anti-dumping duty on Korean synthetic rubber last month.
Hyundai Heavy say that it can minimize the effect of the final decision as it has a production plant in the U.S. The company made a US$100 million (116 billion won) investment to establish transformer production lines with an annual production capacity of 2 million units in Alabama in 2011. An official from Hyundai Heavy said, “Adverse effects on exports are inevitable due to high rate of anti-dumping customs duties. But, we have conditions that can minimize the effect making use of local production lines.”